A bill that looks to strengthen the protection for participants in multiple employer defined contribution plans will be included in the U.K.’s parliamentary session, it was announced Wednesday.
In her Queen’s Speech at the State Opening of Parliament — the formal beginning of the parliamentary year — Queen Elizabeth II set out the U.K. government’s plans for policies and legislation.
Called the Pensions Bill, the measure will tackle, in part, the explosion in multiple employer plans in the U.K., known as master trusts. These DC master trusts will have to meet new criteria and will be subject to closer supervision. In documents released following the speech, the government said the bill will call on master trusts to demonstrate that they meet “strict new criteria before entering the market and taking money from employers or (participants).” The bill also creates greater powers for the Pensions Regulator to authorize and supervise these plans – and to take action when it is deemed necessary.
The retirement industry welcomed the announcement. Morten Nilsson, CEO of NOW: Pensions, multiple employer DC plan, said in a statement in reaction to the announcement that master trusts represent the biggest group of participants in the retirement industry, with about 6 million participants in such a plan. “Well-run master trusts are ideal for the auto-enrollment market as they enable even small employers to benefit from high standards of governance as the independent board of trustees that oversees the running of the scheme has a statutory duty to ensure that it is being run in the best interests of its members at all times.”
However, Mr. Nilsson said that “not all master trusts are the same, and with over 70 operating in the market, not all are going to prove sustainable over the long term.” He added that with no clear process to wind up these trusts, “disorderly exits could pose a real threat (to) the savers, and tighter regulation is a must.”
It was also pledged in the bill that the barriers in place that prevent participants from accessing their savings flexibly will be removed. Freedom and choice changes to the U.K. market last year removed the requirement to purchase an annuity to provide income in retirement, and allowed for easier access to savings, however some are still hit with early exit fees. The government documents said these fees will be capped.
